A jury has slapped a Mississippi bank with a stunning $38.5 million judgment after finding that it wrongfully charged $9,000 in insurance costs to a car loan customer.

The award against Trustmark Corp., a $4.7 billion-asset company, surprised observers because of its sheer size. It amounts to roughly 70% of Trustmark's 1994 earnings and 9% of its equity.

The Jackson-based corporation plans to appeal the decision.

"Trustmark did not get where it is today by taking advantage of its customers," Harris Collier, the bank's general counsel, said in a written statement.

Thomas B. Hudson, a consumer credit attorney with Venable, Baetjer, Howard & Civiletti in Washington, said the award was "enormous" for a suit that not a class action.

"You hear of cases like that very, very seldom," he said. "Up until this year, I don't think I heard of a verdict anywhere near the size of the ones we're talking about in individual action.

Mr. Hudson said the case is surpassed in recent months only by a $50 million judgment against an Alabama consumer finance company.

George Freibert, president of Professional Bank Services in Louisville, Ky., said the size of the award was extraordinary in view of the practices at issue.

"What blows my mind is how they come up with a $38.5 million verdict," he said. "It's the typical deal. Courts sympathize with people, they don't sympathize with institutions. It's not unusual to see extraordinary damages in these bank litigation cases."

Last Wednesday's Jones County's Circuit Court decision was the first of a series of lawsuits filed on behalf of Trustmark customers by attorney Lawrence E. Abernathy 3d. The suits charge Trustmark with breach of good faith and breach of its own auto insurance contracts. About 20 other lawsuits are pending in state and federal courts against Trustmark, he said.

The lawsuit behind last week's decision accused Trustmark of participating in a "nefarious scheme" of buying an expensive collateral insurance without the customers' permission and then adding the charges to the loan balance without informing them.

The annual cost of the insurance was more than three times the cost of a cheaper state coverage plan initially chosen by the plaintiffs. The cost of the premium plus interest was also higher than the original loan balance.

The case stemmed from a $9,227 car loan made to Charles K. Smith and his wife, Clancy, in November 1987. The couple bought a 1988 Nissan Sentra and arranged for full collateral insurance through the state Farm Bureau, at a cost of about $299 for six months' coverage.

About 10 months later, Mr. Smith lost his job and was unable to continue insurance payments, although he didn't lapse on the loan installments. According to the lawsuit, the couple's contract with the bank authorized Trustmark to either continue the insurance through the Farm Bureau, charging it back to the couple at a 14% interest rate, or declare the loan in default and repossess the car.

Instead, the suit states, Trustmark arranged for force-placed coverage, a type of back-up insurance for high-risk drivers, through Central National Insurance and Prudential Property and Casualty Insurance Co., which the plaintiffs said had provided bank officials with special "entertainment" and other benefits to get the business.

The premium was more than $2,000 per year.

But, the suit alleged, bank officials never notified the plaintiffs of the much higher insurance premiums, instead adding them to the loan balance, payable after the original loan matured.

As a result, Mr. Smith did not discover the extra charges until January 1993, after he had repaid the loan. At that time, Trustmark notified him that he still owed more than $9,500 in insurance payments.

"He got a letter that he thought would be the title," said Mr. Abernathy. "It was a bill."

Trustmark officials claimed they notified Mr. Smith of the higher payments, but Mr. Smith and other bank clients said they never received any notices.

The judgment consists of $500,000 in actual damages, plus $38 million in punitive damages. The couple also received title to their car, which at one point had been seized by the bank. The actual damages are split between Trustmark and the insurance sales company, Ross & Yerger Financial Services.

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